Tesla will lay off more than 10% of its global workforce

Signs of unrest at Tesla multiplied Monday after the electric car company told employees it would lay off more than 10% of its workforce to cut costs and two senior executives resigned.

The job cuts, which amount to around 14,000 people, come as the company faces growing competition and declining sales. The management changes and layoffs are a reminder of the unpredictability of Tesla CEO Elon Musk at a critical time for the company.

Musk has not outlined a plan to reverse declining auto sales, and appears focused on long-term initiatives like a self-driving taxi, rather than new models that would help Tesla compete with cars introduced by established automakers and upstarts. rivals from China.

“As we prepare the company for the next phase of growth, it is extremely important to examine every aspect of the company to reduce costs and increase productivity,” Musk told employees in a Monday morning email, a copy of which was reviewed by the New York Times.

“There is nothing I hate more, but it has to be done,” he wrote.

Hours after that email, Drew Baglino, a senior vice president who played a major role in the company's rise from start-up to dominant maker of electric cars, said he had resigned.

“Yesterday I made the difficult decision to leave Tesla after 18 years,” Baglino said in a post on X, the social media site. Mr. Baglino is one of only three managers besides Mr. Musk listed as senior executives on the company's website. His longevity was unusual in a company known for high management turnover.

Baglino may have been blamed for some of Tesla's recent problems, said Gary Black, managing partner of the Future Fund, an investment firm. “Someone has to take the blame for the sharp slowdown in delivery growth, near-record inventories and declining margins and it wasn't going to be Elon,” Black said on X.

It also appeared that Tesla was missing out on an executive key to gaining regulatory approval for self-driving technology. Rohan Patel, a former aide to President Barack Obama and head of policy and business development at Tesla, tacitly confirmed reports that he was leaving. In a post on X, Mr. Patel thanked his colleagues and Mr. Musk for “the last eight years at Tesla.”

“My plans are to be a recess monitor for my second-grade daughter, practice my violin, attend a variety of must-see sporting events, and take my patient wife on a long-anticipated trip,” said the Mr. Patel.

Investors often welcome job cuts because they can lead to higher profits. But that wasn't the case Monday, with Tesla shares ending the day down more than 5%.

Tesla regularly screens its workforce to remove employees that performance managers consider weak, but the numbers are typically lower. “This is something that Elon and Tesla have consistently done throughout their careers,” said Scott Acheychek, chief executive of REX Shares, which offers funds that investors use to bet on or against Tesla shares. “Ten percent is a pretty high figure,” Acheychek added.

Musk's email to employees was previously reported by Electrek, an online news site, and Handelsblatt, a German business newspaper.

Musk has not indicated where the cuts will be made. Many of Tesla's workers work at four large auto factories in Fremont, California, Austin, Texas, Shanghai and near Berlin. Tesla also has a factory in Buffalo that makes charging equipment and a factory near Reno, Nevada, that makes batteries.

The layoffs could help the United Automobile Workers union's efforts to organize Tesla employees in the United States. Company workers may be more open to unionizing if they believe that representation would give them greater job security. Workers at a Volkswagen factory in Tennessee will vote this week to join the UAW, while Mercedes-Benz workers in Alabama will vote next month.

Musk's many other initiatives and his propensity to make polarizing political statements have raised questions about his focus on managing Tesla. Wall Street is increasingly worried about the company: Tesla's share price has lost about a third of its value this year.

Many investors had expressed hope that Tesla could revive flagging sales by introducing a car that would sell for around $25,000 as early as next year, increasing the number of people who could afford the company's cars and responding to competition from Chinese companies who already sell electric ones. car for less than half the price.

Musk cast doubt on those plans by announcing this month that Tesla would unveil a Robotaxi in August. The self-driving taxi is seen as a gamble, in part because even the most advanced systems available today sometimes make glaring errors. Additionally, federal and state regulators will have to approve before Tesla can put such taxis on the road.

This month, Tesla reported a sales decline that caught investors by surprise. The company said it delivered 387,000 cars worldwide in the first quarter, down 8.5% from a year earlier. It was the first time Tesla's quarterly sales fell on a year-over-year basis since the pandemic began in 2020.

The company significantly cut prices throughout 2023 to increase demand, which reduced the profit Tesla makes on each car. Last week, Tesla slashed the price of its most advanced driver-assist software from $199 to $99 a month. But the price cuts seem to be losing their effectiveness. Tesla will announce its financial results for the first quarter on April 23.

Rivals such as BYD in China, BMW in Germany and Kia and Hyundai Motor in South Korea reported increases in EV sales over the same period, suggesting that slowing overall demand for battery-powered models was not the only explanation for the problems of Tesla.

Established companies are closing the gap with Tesla in battery technology and have built new assembly lines to achieve the cost savings made possible by mass production. Honda plans to start producing electric vehicles at a plant in Marysville, Ohio, next year.

Hyundai will start making electric cars at a new plant in Georgia in October, José Muñoz, Hyundai Motor's global president and chief operating officer, said in an interview last month. Hyundai will also begin allowing customers to buy cars on Amazon, a response to Tesla's practice of selling cars online.

Muñoz said customers were willing to pay more for Hyundai electric cars than comparable Teslas. “At the beginning Tesla was premium,” he said. “Now we are premium.”

Jason Karaian AND Melissa Eddie contributed to the reporting.

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